Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities
Accounts receivable (net of allowance) $60,000 Current $38,000
Inventory 90,000 Noncurrent 80,000 $118,000
Plant and equipment (net of depreciation) 200,000 Equity
Land 30,000 Owners' equity 262,000
Total $380,000 Total liabilities and owners' equity $380,000
On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $290,000 cash. The assets, on date of purchase, were valued by Chicago Corpora-tion as follows: accounts receivable (net), $50,000; inventory, $85,000; plant and equipment (net), $200,000; and land, $45,000. In addition, Chicago Corporation estimated purchased intangible assets of $2,000 for customer list and $8,000 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts.
Required:
a. Compute the amount of goodwill included in the purchase price paid by Chicago Corporation. $
b. Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company. Account Name Dr. Cr. Accounts Receivable (net) Inventory Plant and Equipment (net) Land Intangible Asset-Customer List Intangible Asset-Trade names Goodwill Current Liabilities Noncurrent Liabilities Cash
c. What is the minimum amount of goodwill that Chicago Corporation can amortize at the end of 2020?